Jobs surge in February

U.S. non-farm employment rose by 379,000 in February and the unemployment rate fell to 6.2%. KPMG Chief Economist Constance Hunter provides her analysis and thoughts on what lies ahead.

Constance L  Hunter

Constance L Hunter

Former Principal and Chief Economist, KPMG LLP

Video transcript

Today we saw confirmation of green shoots in the U.S. economy. We added 379,000 jobs and the unemployment rate fell to 6.2 percent. This confirms our overall view that we will add about 6 million jobs back to the U.S. economy this year. We won't get back to pre-pandemic levels but we will make substantial progress. Of-course, all of this is predicated on continued progress against the virus. Continuing to vaccinate, continuing to flatten the curve, and lower the number of cases so that we don't fall victim to these new strains of the virus that seem more contagious.

If we are able to do that, it looks like we should have people sufficiently vaccinated by the end of May and this is the most important factor to returning our economy to normal. That coupled with fiscal assistance should help us achieve close to six percent growth this year. We expect the news to continue to get better throughout the spring and we expect these green shoots to grow into a full-fledged garden of growth as the year progresses.

February jobs growth makes significant headway

On Friday March 5th the February jobs data was released. It showed that U.S. employment rose by 379,000 in February and the unemployment rate fell by 0.1 ppt. to 6.2%. This is exciting news as it gives support to our forecast that the U.S. economy will add back about 6 million jobs in 2021, making significant headway in replacing the jobs lost due to the pandemic.

Not every sector experienced gains, the goods-producing industries shed 48,000 jobs, with a 21,000 increase in manufacturing employment offset by 61,000 lost construction jobs. The leisure and hospitality sector gained 355,000 jobs and drove most of the employment gains this month. The winter case surge reversed last month as vaccines were deployed around the country and states began to ease second-wave social distancing rules. Other services industries also showed strong gains, with a significant turnaround in health care employment after a large loss last month. The U.S. government also shed 89k jobs, with 86k of the losses at the state and local level and the majority of jobs being lost in education services.

Despite the fact that there are 9.4 million fewer employed workers than a year ago, some labor markets are showing more tightness than others. The K shaped economy we discuss in our chartbook can be seen in the unemployment rate for those who can work from home which is 3.5% versus 7.6% for those that must work at their job site. Therefore, we can see that some labor markets, especially those for workers who can work from home, are likely experiencing shortages. This means it is important to look beyond the headline numbers to understand the contour of the economy.

Note: the survey period was the week before the Texas snowstorm so any employment impact was not captured.